The Reserve Bank of India has directed co-operative banks to obtain minimum two independent valuation reports for properties valued at Rs50 crore or above.

As of now, different banks follow different policies for valuation of properties and appointment of valuers for the purpose, RBI noted.

''The issue of correct and realistic valuation of fixed assets owned by banks and that accepted by them as collateral for a sizable portion of their advances portfolio assumes significance in view of its implications for correct measurement of capital adequacy position of banks. In this context, there is a need for putting in place a system/procedure for realistic valuation of fixed assets and also for empanelment of valuers for the purpose,'' RBI said in a notification to district central co-operative banks (DCCBs).

While formulating a policy on valuation of properties and appointment of valuers, banks should be guided by the following aspects RBI said banks should obtain minimum two independent valuation reports for properties valued at Rs50 crore or above.

Banks should have a board-approved policy in place for valuation of properties including collaterals accepted for their exposures. The valuation should be done by professionally qualified independent valuers, i.e., the valuer should not have a direct or indirect interest.

In addition to the above, RBI noted the extant guidelines on capital adequacy permit banks to include revaluation reserves at a discount of 55 per cent as a part of Tier II capital.

''In view of this, it is necessary that revaluation reserves represent true appreciation in the market value of the properties and banks have in place a comprehensive policy for revaluation of fixed assets owned by them'', RBI said.

Such a policy should inter alia cover procedure for identification of assets for revaluation, maintenance of separate set of records for such assets, the frequency of revaluation, depreciation policy for such assets, policy for sale of such revalued assets etc, it said.

The revaluation should reflect the change in the fair value of the fixed asset and the frequency of revaluation should be determined based on the observed volatility in the prices of the assets in the past, it said.

Further, any change in the method of depreciation should reflect the change in the expected pattern of consumption of the future economic benefits of the assets. The banks should adhere to these principles meticulously while changing the frequency of revaluation / method of depreciation, RBI said.

Banks should have a procedure for empanelment of professional valuers and maintain a register of 'approved list of valuers'. They should prescribe a minimum qualification for empanelment of valuers.

''Different qualifications may be prescribed for different classes of assets (eg, land and building, plant and machinery, agricultural land, etc.). While prescribing the qualification, banks may take into consideration the qualifications prescribed under Section 34AB (Rule 8A) of the Wealth Tax Act, 1957'', it said.

RBI also asked the co-operative banks to follow relevant accounting standard issued by the Institute of Chartered Accountants of India.